Housing Affordability.

Friday, March 14, 2008 at 12:58pm
I just read a recent article in the Globe and Mail about housing affordability hitting an 18 year low. http://www.theglobeandmail.com/servlet/story/RTGAM.20080314.wafford0314/BNStory/Front
Another reader of the article posted this comment, and I haven't checked the facts on it, but it doesn't sound too far off.
"The Central Screwtinizer from Ottawa, Canada writes: The RBC report states “Going forward, falling mortgage rates, weakening house price gains and decent income growth should all lead to improved affordability across most markets.” I think not...read on... first off, according to the Ottawa-based Vanier Institute for the Family, "average Canadian household debt is equal to 131 per cent of household income compared with 90 per cent in 1990." Statistics Canada says, "40 per cent of Canadian credit card holders regularly pay interest on their monthly balances." A recent Investors Group survey found "that 35 per cent of Canadians plan to carry up to $100,000 in debt into retirement."... how you ask? Read on... From the Globe and Mail of January 5, 2008 "Statistics Canada reported recently that the earned income of the "average" Canadian -- the so-called median income -- was the same in 2004 as in 1982. After we subtract inflation to keep the purchasing power of a dollar roughly constant, it turns out that median income, before taxes, did not rise at all over those 22 years. Yet during that same time the Canadian economy grew, in real per capita terms, by more than half. But only the very well-paid - those above the 90th percentile of the income distribution - saw any significant increase in earned income; and the higher up the earnings ladder, the greater the growth." Also, if we approach Recession led by the U.S. it won't be consumers leading us out any time soon and the financial sector will not likely be leading us out of it either considering their debts...so that leaves just the commodities sector realistically which today was downgraded in a Globe article. Canadians are 'maxxed out'! I couldn't begin to tell you how they are going to be able to afford the inflated house prices of today let alone how boomers are going to unload those houses without taking a loss, except the 90th percentile of course...."